Next-gen rebalancing

A new era of RIA efficiency

Table of Contents

Introduction

 

Financial advisors face constant struggles in today’s fast-paced financial landscape. One of the big questions they must answer is, “How can we manage our time effectively and manage portfolios with precision while delivering exceptional service to our clients?” According to Cerulli Associates, RIAs spend an average of 57.6% of their time on client-facing activities and struggle with the time-consuming process of investment management, for example, which pulls financial advisors away from business building and client-facing activities.1 

Portfolio management, particularly rebalancing and trading, can be time-consuming and error-prone due to manual processes and reliance on spreadsheets. However, firms can gain greater operational efficiency and agility to scale at sustainable levels. This whitepaper explores how innovative rebalancing and trading software can save advisors valuable time, enhance accuracy, and scale to growth while building strong client relationships and achieving superior results.

 

SECTION 1 The time crunch: a key driver for technology adoption

For financial advisors, time is a precious commodity. Advisors often find themselves stretched thin between client meetings, research, and administrative tasks. Manual portfolio rebalancing and trading can be particularly burdensome, involving:

Data gathering:
compiling and analyzing account data is a time-consuming and error-prone process.

Order creation and execution:
constructing and submitting orders for multiple accounts can be tedious and prone to mistakes.

Monitoring and reconciliation:
continuously tracking orders and ensuring accurate execution adds another layer of complexity. 

These time-consuming tasks detract from advisors’ core function—providing comprehensive financial guidance and building strong client relationships. As advisors manage an increasing number of clients and portfolios, the need for efficient solutions becomes even more critical. 

The struggle with inefficiency

Even RIAs in well-established businesses grapple with inefficient and outdated processes. Many advisors still rely on manual methods, such as Excel, to make investment decisions and enter trade information. Reliance on disparate systems for trade reconciliation with multiple custodians creates unnecessary complexity and hampers scalability.

The power of household-level rebalancing

Household-level rebalancing takes a holistic view of client accounts, optimizing asset allocation, tax efficiency, and risk across the entire household rather than individual portfolios. By coordinating trades and minimizing unnecessary transactions, it helps advisors improve outcomes while reducing cost and complexity.

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Meeting the demand for personalization

Client expectations have evolved significantly, with more than 64% of HNWIs who are concerned by the lack of personalized advice tailored to their financial situation.2 In a world where consumers expect customized experiences, RIAs must adapt to retain and attract clients.

Diverse client needs 

RIAs now serve an increasingly diverse client base, each with unique investment preferences, goals, and values. These diverse needs range from alternative investments to socially responsible investing and greater transparency in portfolio management. Advisors must cater to these evolving requirements while maintaining core services like rebalancing and tax management.

SECTION 2 Scaling to survive: the RIA growth dilemma

In today’s rapidly evolving financial landscape, advisors face a critical challenge: scalability. Whether they operate as single-person practices or within large financial institutions, RIAs constantly grapple with balancing personalized client attention and acquiring new clients to grow their assets under management (AUM). Meaningful growth demands a strategic approach to reaching more clients without exhausting available resources, time, and energy. 

As operational costs rise and clients demand more personalization, the ability to grow efficiently is not just an aspiration; it’s necessary for survival. Scalability and innovative rebalancing and trading technology are essential for RIAs to thrive in this dynamic environment.

SECTION 3 The power of automation: how next-level rebalancing and trading software saves time

Innovative rebalancing and trading technology can address efficiency challenges head-on by automating many time-consuming tasks in three critical ways:

Faster, more accurate processing

Modern rebalancing and trading software significantly reduces the time required to manage portfolios. Advisors can focus on strategic decision-making and client interactions by automating routine tasks, such as rebalancing and executing trades. This technology accelerates the process while minimizing the risk of human error, ensuring a higher degree of accuracy and consistency.

Accurate and standardized processes

Performing tasks accurately and in a standardized manner is a game-changer. Standardization ensures that all transactions follow a predefined set of rules, reducing discrepancies and enhancing compliance. Accurate processing further builds client trust, as advisors can confidently present portfolio changes and performance metrics. Setting specific rebalancing rules and parameters ensures consistency across all client accounts.

Integrated order management

Generating and submitting orders for multiple accounts simultaneously streamlines the trading process. To establish the best trading strategy for addressing risk, urgency and market conditions, order execution needs to be well integrated with portfolio monitoring, pre-trade compliance, rebalancing and trading. When rebalancing and directed trading are natively integrated with an order management system (OMS), advisors can more effectively manage orders for multiple custodians, set up trade approvals, leverage FIX for straight-through processing, and trade away to achieve best execution.

SECTION 4 Achieving efficiency: rebalance smarter, not harder

In today’s demanding financial landscape, advisors must be efficient with their time. Manual rebalancing accounts or households can be a tedious task, hindering growth. Advanced rebalancing technology can empower advisors with scalability and flexibility, allowing them to rebalance smarter, not harder. Here’s how:

Flexible rebalancing options

One of the standout features of advanced rebalancing and trading software is its flexibility. Firms can execute over 15 different rebalance actions, offering unparalleled efficiency. These actions are not confined to a single global rebalance and trade module; they extend across individual accounts, households, specific positions, or filtered groups of accounts or households, as well as various tax modules and reports, providing a holistic approach to portfolio management. 

Diverse execution options

Advisors can perform rebalance actions across accounts, households, and several reports, including a security cross-reference report at the position level. This diversity allows for targeted rebalancing at multiple levels:

  • Accounts: individual accounts can be rebalanced based on specific criteria.
  • Households: entire households, filtered lists, or select groups of accounts can be rebalanced, ensuring consistency within family or group portfolios.
  • Reports: rebalancing can be executed at the position level, allowing for precise adjustments if a client holds a particular position or the firm intends to add a new position across multiple accounts. 

Unmatched efficiency across account sizes

The true power of rebalancing and trading software lies in its scalability. This allows advisors to focus on growing their practice without being bogged down by administrative tasks.

Rebalancing scalability is evident in the capacity to manage rebalancing actions across varying account volumes—be it 10, 100, or thousands of accounts. This is crucial for firms aiming to expand their client base without compromising service quality. As the number of clients grows, rebalancing actions remain efficient and accurate, maintaining the firm’s operational integrity. 

Seamless data flow: the backbone of operational excellence

At the heart of effective integration lies seamless data flow. Imagine a world where data flows effortlessly between your portfolio management, order management, and custodial systems. Integrated solutions eliminate the need for manual work, saving you valuable time and minimizing errors while ensuring continuity across your workflows. Eliminating data silos and enabling real-time data access empowers you to make informed decisions and react swiftly to market fluctuations. 

With the integration capabilities offered by platforms like RedBlack, RIAs and wealth managers can harness the power of open architecture and APIs to connect disparate systems within their tech stack. 

Customization: tailoring solutions to client needs

Client needs are unique, and customization is critical to delivering personalized experiences that meet individual needs. Integrated platforms offer the flexibility to tailor your approach. Advisors can create customized workflows, leverage tax-aware rebalancing tools, and manage complex directed trading strategies—all while ensuring compliance with client preferences and regulations. With the customization capabilities of integrated systems, firms can enhance client satisfaction, deepen relationships, and differentiate themselves in a competitive market landscape.

SECTION 5 Unlocking operational efficiency with RedBlack

In a competitive financial landscape, achieving cost-effective scalability is essential for long-term growth. The solution to the scalability challenge lies in leveraging advanced technology. One such solution is the RedBlack rebalancing and trading solution. 

RIAs need technology solutions that consolidate trading, rebalancing, order management, reporting, and other critical functions into one cohesive platform. Such solutions enable transparency, real-time processing, and customization, all while improving operational efficiency. RedBlack not only automates critical processes but also integrates with existing systems, enhancing workflow efficiency and transparency. 

A comprehensive all-in-one solution for rebalancing, trading and order management, RedBlack streamlines complex operations and daily workflows, applying both standardized and highly customized processes to enhance operational efficiency, reduce errors, and ease staffing burdens. 

Once the process is standardized and automated to accelerate speed and accuracy, knowledge of clients’ needs and wants is memorialized forever within the system, rather than getting lost or walking out the door with a portfolio manager or advisor. Trading is streamlined, and middle- and back-office tasks are pushed down the food chain, giving portfolio managers and investment officers more time to add strategic value and respond faster to client needs.

Personalization at scale 

One standout feature of RedBlack is its ability to enable personalization at scale. It eliminates manual processes, streamlines workflows, reduces costs, and frees advisors to focus on high-value activities and client engagement. Additionally, it supports faster investment decision-making and complex rebalances in minutes, all while ensuring compliance with clients’ needs and policies. 

The power of cloud 

For RIAs looking for advanced automation and efficiency with the added benefits of cloud-based flexibility, RedBlack provides personalized rebalancing, robust order management, and multi-custodian support without complex IT infrastructure.

Future-proofing your business

 Investing in scalable technology solutions is a vital step toward future-proofing your firm. Businesses that embrace scalability can meet clients’ evolving needs and stay ahead of the competition. Conversely, those who delay such investments risk losing opportunities to more agile and technologically advanced competitors. 

In the ever-evolving world of finance, RIAs must embrace scalability as a means of survival and growth. Technology solutions like RedBlack offer the tools to automate processes, deliver personalized services at scale, and ensure long-term success in a competitive landscape. By investing in the right technology, RIAs can survive and thrive in this challenging environment, meeting their clients’ diverse and evolving needs.

Flexible, scalable trading operations 

Achieving greater ease of use, flexibility, and scalability across trading operations is critical to increasing growth and service quality. Trade blotters and customized workspaces can enable your traders to perform different functions, such as creating and managing placements of block trades, and having complete visibility of execution status. 

Integrated trading execution and OMS connectivity are crucial for firms with complex rebalancing requirements. Such functionality can enable advisors to review and approve orders quickly while providing support across all asset types and sophisticated workflows.

Accelerating AUM growth

“With RedBlack, we have been able to expand our investment model options and accelerate our AUM growth without adding dedicated traders while simultaneously increasing the complexity of the assets we manage.”

Eric Dare, CEO, Vicus Capital

SECTION 6 Invest in your time and your clients

In today's competitive financial services industry, time is money. Advanced rebalancing and trading technology is vital for financial advisors seeking to enhance time efficiency and scalability. By automating portfolio management processes, platforms like RedBlack can significantly reduce the time spent on administrative tasks, increase accuracy, and standardize procedures, freeing them to focus on what matters most – building strong client relationships and delivering exceptional results. Flexible and scalable rebalancing capabilities empower firms to manage diverse client needs effectively, regardless of the account volume. Adopting such technology will be essential for advisors aiming to stay competitive and deliver exceptional service as technology continues to evolve.

Key takeaways

Financial advisors can achieve greater efficiency, scalability, and precision, positioning themselves for sustained success in a competitive market with: 

  • Time efficiency: automation of rebalancing and trading processes saves time and reduces human error.

  • Accuracy and standardization: ensures consistent and compliant portfolio management.

  • Advanced scalability: flexible rebalancing actions across multiple modules and reports, suitable for varying account volumes.

  • Enhanced client service: frees up advisors to focus on strategic planning and client engagement, ultimately improving client satisfaction.

Sources

  1. U.S. Advisor Metrics 2024: Adding Services to Scale, Cerulli Associates.

  2. World Wealth Report 2024, Capgemini.

     

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